Question
Sandhill Company uses special plastic wrapping equipment in its shipping business. The equipment was purchased in January 2016 for $4,640,000 and had an estimated useful
Sandhill Company uses special plastic wrapping equipment in its shipping business. The equipment was purchased in January 2016 for $4,640,000 and had an estimated useful life of 8 years with no salvage value. At December 31, 2017, new technology was introduced that would accelerate the obsolescence of Sandhills equipment. Sandhills controller estimates that expected future net cash flows on the equipment will be $3,248,000 and that the fair value of the equipment is $2,784,000. Sandhill intends to continue using the equipment, but it is estimated that the remaining useful life is 4 years. Sandhill uses straight-line depreciation.
Prepare the journal entry (if any) to record the impairment at December 31, 2017. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Prepare the journal entry for the equipment at December 31, 2018. The fair value of the equipment at December 31, 2018, is estimated to be $3,360,000. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
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